Collapse of the ruble?

[TheNewGuy]

I'm interested in your opinions on the ruble, given its recent troubles. We don't often have many Russia threads, so let's see what we get...

What do you understand as the cause of the recent collapse of the ruble? Ukraine? Oil price falls? Both? Neither?
What ramifications do you anticipate from a continued fall in price of the ruble relative to the USD/pound sterling/Euro/whathaveyou?
What actions (if any) do you think Russia could take to prevent further price collapse? Should they?
Any other comments?

[TheNewGuy]

Also, inb4 "this is what Socialist states get for their Socialism."

[Siggon Kristov]

I think it's a combination of the oil price falls and their isolation from the West.
Speculation and panic, resulting from the material factors, also add to the material factors in contributing to currency devaluation.

It happened in Jamaica. As soon as our dollar started to lose value, there was panic and then persons were switching from our currency to other currencies, and that only contributed to devaluation more.

I don't know what exactly Russia can do about it.

[Afrocentric]

Doesn't Russia export natural gas? Why can't they just subsist on that until the oil markets settle?

[Zongxian]

Doesn't Russia export natural gas? Why can't they just subsist on that until the oil markets settle?

Oil sure is a great resource, until a country realizes that it is necessary to have more to an economy than oil resources. Check out information on the 'curse of oil.' Or even the Dutch disease, too. Oil is quite a dangerous resource and ultimately it won't solve Russia's problems.

[CanadianEh]

Doesn't Russia export natural gas? Why can't they just subsist on that until the oil markets settle?

Oil is not enough to keep Russia a float

[TheNewGuy]

Speculation and panic, resulting from the material factors, also add to the material factors in contributing to currency devaluation.

It happened in Jamaica. As soon as our dollar started to lose value, there was panic and then persons were switching from our currency to other currencies, and that only contributed to devaluation more.

There's a lot to be said for this, I think, though I'm by no means an economics specialist. Russians who hold liabilities in foreign countries have little incentive to stick around to wait and see if the ruble will recover - debt collectors will come knocking and you might as well sell the ruble now while it's worth 1/50th of a USD, just in case it keeps falling. There are far greater incentives to sell than to hold, so everyone sells and it becomes a self-fulfilling prophecy.

I don't know what exactly Russia can do about it.

I suppose this part of my question wasn't fair: if anyone knew what to do they'd be doing it. In any event, I've heard talk of Russia's central bank considering limiting transactions with the ruble - you can only withdraw so much at a time from the bank, you can only convert limited amounts of currency at a time, etc. These measures, apparently, aren't all that drastic... In most 'developing' (whatever that means) economies, these controls are pretty typical. It's actually atypical that Russia doesn't impose them currently.

I suppose I'm most interested in thoughts on what might be the short- and long-term ramifications of a failure to resolve the issue. Anyone have any thoughts on that? What does a further destabilized Russian economy mean for Europe, Asia, and the world?

Doesn't Russia export natural gas? Why can't they just subsist on that until the oil markets settle?

Well, yes, they do. But Russia relies pretty heavily on both for lack of real diversity in their economy. So yes, probably most countries in the world would die to have Russia's natural gas income, it's still not enough to stand alone where both gas and oil previously stood.

[Amazeroth]

I'm interested in your opinions on the ruble, given its recent troubles. We don't often have many Russia threads, so let's see what we get...

What do you understand as the cause of the recent collapse of the ruble? Ukraine? Oil price falls? Both? Neither?

Exactly as Siggon said - oil price + sanctions. Oil being their main thing to sell, and the sanctions hurting most of the other industries.

What ramifications do you anticipate from a continued fall in price of the ruble relative to the USD/pound sterling/Euro/whathaveyou?

Possibly national bankruptcy for Russia. Also, more fun for Western investors. Apparently, stock prices for one of Austria's largest banks have fallen 10 percentage points in a day, because they are investing in Russia.

What actions (if any) do you think Russia could take to prevent further price collapse? Should they?

What can they do? They can raise the key interest rate (which they already did), they can buy Rubles (which they did), but these are all short-term measures, of course.

[Siggon Kristov]

Doesn't Russia export natural gas? Why can't they just subsist on that until the oil markets settle?

Oil is not enough to keep Russia a float

Especially with oil prices dipping and sanctions crippling Russia's export market.
Oil countries will still be making money from oil, but it will be much less than they projected (so budgets are screwed in some cases).
That's the problem with relying too heavily on one resource, and relying too heavily on exports is another problem. Combined? Yikes.